-Revenue per each additional unit of output -change in total revenue when output increases by 1 unit-can be negative

Output Effect

-Q is higher -increase total revenue

Price Effect

-P is lower -Decrease total revenue

because MR<P the MR curve is.....

below the demand curve

demand curve shows how....

the quantity affects the price of the good

marginal revenue shows how....

the firm's revenue changes when quantity increases by 1 unit

Marginal revenue is always less than the price because.....

the price on all units sold must fall if the monopoly increase production

Profit Maximization: If MR>MC then.....

increase production

Profit Maximization: If MR< MC then....

produce less

Maximize profit at

MR=MC

In a monopoly price.....

exceeds marginal cost

Profit:

TR-TC = (P-ATC) xQ

benevolent planner

maximize total surplus

A benevolent social planner who wanted to maximize total surplus in a market would...

choose the level of output where the demand curve and marginal cost curve intersect. -below this level the value of the good to the marginal buyer exceeds the marginal cost of making the good -above this level the value to the marginal buyer is less than marginal cost

monopoly produces.....

less than the socially efficient quantity of output-deadweight loss

The deadweight loss is....

triangle between the demand curve and MC curve

Price discrimination

-sell same good at different prices to different customers -strategy to increase profit -can raise economic welfare -requires ability to separate customers according to their willingness to pay

Perfect Price Discrimination

-charge each customer a different price-monopolist get the entire surplus -no deadweight loss

marginal cost is less than average total cost. Therefor if regulators require a natural monopoly to change a price equal to marginal cost, price will be below average total cost and monopoly will lose money

One difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where.....